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Finance decision making

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBL Exams › Finance decision making

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by Ken Garrett.
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  • December 3, 2018 at 3:33 am #486865
    mehazia
    Participant
    • Topics: 54
    • Replies: 6
    • ☆☆

    Can you please explain the GRAFFOF question in the BPP revision kit, as to how hey got the respective values of released funds from receivables and payables?

    December 3, 2018 at 8:55 am #486897
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10221
    • ☆☆☆☆☆

    Currently trade receivables = 260 on sales of 1600 pa or on sales of 1600/365 per day

    This represents 260/(1600/365) = 59.31 days of sales

    If credit is shortened to 30 days from its current 59.31 days ie down by 29.31 days, then this will reduce receivables by 29.31 x sales per day = 29.31 x 1600/365 = 128

    Currently trade payables are 75 on purchases of 1375/365 per day.

    Days of credit taken are therefore: 75/(1375/365) = 19.90 (about 20 days). If 40 days credit were taken, payables would therefore approximately double to 150 leaving another 75 in the bank.

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